) recently announced organizational changes involving radical
transformation in the top management for its Diagnostics
As part of the organizational changes, the Senior Vice President
and General Manager of Diagnostics, Carl Hull, announced his
retirement. Hull had earlier served as the Chairman, President
and Chief Executive Officer of Gen-Probe (erstwhile molecular
diagnostic player) until the completion of the acquisition.
Notably, Hologic continues to successfully integrate Gen-Probe,
following the closing of the acquisition in Aug 2012. The company
is moving forward with several organizational changes to further
gain from its solid footing in the Diagnostics business.
The successful integration of Gen-Probe with its legacy
Diagnostics segment is likely to yield positive results as the
company expects to realize cost synergies of over $40 million by
the end of the first year of the acquisition. Hologic also
envisages an additional $35 million in cost synergies by the end
of the third year.
Moreover, the complementary product portfolio, cross-selling
opportunities and enhanced global footing should result in
potential revenue synergies for Hologic. As the integration
process is accelerating, Hologic expects to create significant
value from the takeover. The synergies underline the company's
attempt to improve its infrastructure and develop its pipeline.
Subsequent to the Gen-Probe deal, Diagnostics became the largest
segment at Hologic (representing 44% of the total sales in the
fourth quarter of 2012). The contribution is likely to increase
further as the organizational changes leverage the franchise
Hologic is leaving no stone unturned to consolidate operations
and realize potential synergies. While we await updates on the
revenue growth potential on the back of synergies, we are
encouraged by the company's ability to spot the timing and the
value of the cost synergies.
Although Hologic constantly works to create value for its
shareholders, several challenges such as economic uncertainties
in Europe, slower sales cycles and increasing pricing pressure
keeps us on the sidelines. Accordingly, the stock carries a Zacks
Rank #3 (Hold). Other medical sector stocks that warrant a look
) each carrying a Zacks Rank #1 (Strong Buy).
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